loader  Loading... Please wait...

Question(s) / Instruction(s):

Sustainable products raises trees, cut the trees into logs and processes them into paper. It sells them to a distributor who then sells the paper to printers. Assume a weighted average cost of capital of 10 percent is appropriate for timber and paper processing. Here are the costs and revenues of each stage of the value chain. All data are for the production of enough timber to produce 20, 000 tons of paper.

Timber: estimated market value of timber assets at beginning of year is $5.100.000 and at end of year is $4.800.000. Revenues if the timber were sold in the market would equal $2.100.000. Operating costs total $1.500.000 excluding depreciation.

Paper Processing: The estimated market value at beginning of year is $15.000.000 and at end of year $13,000.000. Revenues if the paper were sold in the market would be $12.000.000. Operating costs total $9.000.000 including all costs of materials but excluding depreciation

Distribution: The distributor sells the paper for $800 per ton. The cost of paper to the distributor (costs of goods sold) can be found by reviewing the sales from paper processing. In addition to the cost of paper, the operating costs total $135 per ton, excluding economic depreciation. The cost of capital for the distributor is $50 per ton.

Retailer: The retailer sells the paper for $850 per ton. The cost of the paper to the retailer (costs of goods sold) can be found by reviewing the sales from the distributor. Operating costs total $25 per ton, including economic depreciation. The cost of capital for the retailer is $18 per ton

1) Compute the profits of each stage of the value chain. Show amounts in total (for 20.000 tons) and per ton.

2) Assume you are advising a loan company what you would say briefly about the profitability of each part of the value chain.

Find Similar Answers by Subject


Student Reviews

Rate and review your solution! (Please rate on a Scale of 1 - 5. Top Rating is 5.)


Expert's Answer
Download Solution:
$2.50

This solution includes:

  • Plain text
  • Cited sources when necessary
  • Attached file(s)
  • Solution Document(s)

You Recently Viewed...



Reach Us

408-538-8534

20-3582-4059

39-008-4233

+1-408-904-6494